Diamond Quarterly #135

Rock-Solid Assets

Not just for sparkle and shine, diamonds are proving a shrewd investment.

HOW do you discreetly carry $100 million in your pocket? In the form of diamonds. A handful of top-quality stones can be worth that much or more. Take, for instance, the Oppenheimer, a 14.6-carat fancy vivid-blue diamond of approximately the size of an almond that sold in May at Christie’s for S58 million. This sales and several other auction record-breakers in the past few years have caught the attention of investors, who have begun adding diamonds to diversified portfolios that already include more traditional holdings such as stocks, bonds, and real estate. And there’s an additional bonus—beyond their value—to investing in diamonds: You can wear them. “It is the most discreet indulgence,” says Robert O’Connell, the CEO of Asprey US. He says when a person wears a small 2-carat fancy vivid-green diamond ring, nobody is likely to know that it’s worth at least a few million dollars.

“Diamonds are a superb investment,” says Laurence Graff, a billionaire who earned his wealth by trading in diamonds. “Diamonds are heirlooms that are easily trans­portable and sure to increase in value, as well as serving as an unforgettable way to celebrate great moments.”

Their portable nature can make diamonds an especially attractive investment, notes Fawaz Gruosi, founder of the Swiss jewelry brand de Grisogono. He points to volatility in global economics and politics. “You can invest in bonds, stocks, art, and real estate,” he says, “but if you have a problem, you can’t take the house or a painting with you.”

This notion may be driving interest in a British-based diamond fund, which has offices in London and ownership ties to Asprey. Founded in 2007 by Philip Baldwin and Mahyar Makhzani, the fund acquires and sells only top-quality colored diamonds. Since it was established, the fund reports, it has realized annual gains of more than 12 percent. “It’s been well documented that since 1959, colored diamonds have increased in price year after year, with gains on average of 10 to 12 percent per annum,” says Makhzani, who, with Baldwin, acquires the stones directly from the mines or from dealers and private collectors with whom he and his partner have longstanding relationships.

One of their most prized stones is the Argyle Prima, a 1.2-carat fancy red diamond from the Argyle mine in Western Australia, with a value greater than $5 million. The small stone commands such high value because, Baldwin says, “there are probably fewer than 100 known red diamonds of 1 carat or more in the world.”

Industry experts predict that prices will continue to rise, especially because the Argyle mine—the world’s only con­sistent source for pink, violet, and red diamonds—could be depleted by 2020. Since 2000, the value of Argyle dia­monds has significantly outperformed several major equity indexes, including the Dow Jones, Hang Seng, and S&P 500, according to financial reports from Rio Tinto, the mining giant that owns the Argyle mine.

Just as scarcity is driving up the value of diamonds, so too is the increased demand for them. More and more people want to acquire rare stones. “At the beginning of the last century, the only people who could buy a sizable diamond would be a king, queen, or a sheikh,” says Graff “Today in our society, people have become very wealthy and there are not enough gem-quality stones to satisfy demand, and so they are becoming rarer and more desir­able all the time.”

When Graff has the opportunity to acquire a newly discovered treasure from a mine company he must act quickly, because these days there are many more buyers for each stone. Despite the increased competition, he acquired and cut five exceptional rough stones this year. Collectively, the diamonds are worth more than $100 mil­lion. They include a 105.07-carat D-flawless pear-shaped stone christened the Graff Vendome, and the Graff Venus, a 118.78-carat D-flawless heart-shaped diamond that was cut from a 357-carat rough diamond.

From sales at major auction houses around the globe to private acquisitions in the major diamond centers of Antwerp, New York, Tel Aviv and beyond, rare colored diamonds have become arguably the most important investment collectible for their rarity, portability, privacy, growth and price stability.

All around the world, hard asset investors are recognizing the importance of maintaining a collection of rare diamonds to protect their wealth and diversify their portfolio into sound tangible assets not affected by short term trading mechanisms and offering a stable and consistent long-term hedge against currency devaluation and inflation.

Over the last decade, rare colored diamonds have shown solid growth, with yellow diamond prices growing by over 50 %, pink diamond prices growing over 100 % and blue diamond prices growing over 150 %. More importantly, they have held their value well during recessions and economic downturns, which offers investors the chance to protect their wealth utilizing rare colored diamonds.

Jewelers are cultivating diamond collectors in a man­ner similar to the way that art dealers nurture patrons. De Beers is courting its VIP clients with small gatherings at which it displays a coterie of stones from its Masterpiece collection of rare colored and white diamonds. Clients have the opportunity to learn about these lesser-known stones and compare their color, cut, and quality.

David Shara—the owner of Optimum Diamonds, a New York firm that specializes in selling colored diamonds—says that once clients are educated about collectible dia­monds, they typically become collectors. Many of them are wealthy people looking for stable investments, he says, and many are “doomsayers who want the ability to keep their money by their side or even under their pillow.”

As with art collectors or car collectors, for some dia­mond collectors the chase is the biggest thrill. “You have to pay a ton of money for these stones, but people are always chasing after the best,” says Shara. “And regard­less of price, they love the process of building a collection and capturing the prize.”

The Direct Diamond Source For Sophisticated Collectors and Investors.

AIDC Advantage Corp. is the marketing arm of the American Institute of Diamond Cutting. We have over 30 years of experience working with colored diamond rough from around the world – teaching grading, cutting and polishing to the industry. With the growth of the colored diamond market, the firm has changed its venue from not only supplying dealers and retailers, but more importantly for the collectors/investors, dealing direct with private buyers in the acquisition of GIA certified Fancy Colored Diamonds.

We are unique in our envious position in that we have international network of contact that apprise us of the availability of rough uncut diamond material ahead of the competition and on a global basis.

The information in this newsletter is for informational purposes only. The information contained in these quotes is believed to be from reliable sources. AIDC Advantage Corp. “the company” cannot be held liable for any misrepresentations on behalf of the sources we use. The company is not an investment advisor nor are they licensed to give investment advice. The company assumes that all buyers acquire colored diamonds for collectible and jewelry purposes as well as the long-term potential of the market. It is advised to contact a qualified advisor before entering into the colored diamond market. The company cannot guarantee that past performance of colored diamonds will continue in the future and that a colored diamond purchased from the company will provide a net gain. They are not as liquid as some collectibles. They are not necessarily appropriate for every individual. The quotes used only represent part of the article. For full viewing of any article, please contact your advisor. For more information, please refer to the terms & conditions in the AIDC Advantage website.